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AmEx Card Issuer to Pay $112 Million in Fines and Refunds for Illegal Credit Card Practices

Account Receivable Management Article

October 03, 2012

AmEx Card Issuer to Pay $112 Million in Fines and Refunds for Illegal Credit Card Practices

By Tracey E. Schelmetic

TMCnet Contributor

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An American Express (News - Alert) -chartered bank that issues credit cards for the financial giant received a slap this week from the new Consumer Financial Protection Bureau (CFPB) for misbehavior. The agency, together with the Federal Deposit Insurance Corporation (FDIC), reached a settlement yesterday with the bank, which was accused of misleading and illegal practices, which will require it to provide refunds to about 250,000 consumers. The payout will total $85 million in refunds and about $27 million in civil fines. It covers consumers who signed up for the American Express “Blue Sky” credit card during the last nine years.

The CFPB and FDIC determined that the bank had misrepresented to consumers “that if they entered into an agreement to settle old debt (that was no longer being reported to consumer reporting agencies), such settlement would be reported to consumer reporting agencies and thereby improve the consumers’ credit scores.”

The agreement with the bank, American Express Centurion Bank of Salt Lake City, also reportedly involved the Federal Reserve and the Office of the Comptroller of the Currency (OCC).

In addition to the misrepresentation, American Express is alleged to have used settlement solicitations “that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balance remained a debt owed to American Express” when consumers applied for a new card, InsideARM is reporting this week.

Among the malfeasance, the bank is accused of is false bonus points offers, late fee violations, age discrimination and illegal debt collection practices.

Existing AmEx customers will see a credit in their account, and those consumers who cancelled the card will receive checks by mail. AmEx says it expects all refunds to be complete by March 15, 2013, according to the CFPB.

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